Friday, 16 June 2017

Walau!Those experts are making retirement planning so complicated and full of formula and probabilities.So far Uncle8888 has find this model for retirement planning easier to plan and understand.Less Analyzing. More Retiring - CW8888

The way Uncle8888 plans for his own retirement to build sustainable retirement income for life is ...

Step 1 : Know your past annual household expenses. The longer historical data will be more useful and practical guide to forecast how much money is enough factoring inflation.Step 2 : Don't be afraid to include asset draw-down strategy as part of cash flow to fund future expenses when necessary. This will be the Mother of high probability of success in your retirement planing.Step 3: Include other sources of cash flow e.g. investment income; ad hoc, part-time or free lance income ; even small or little it will help to extend your retirement plan by 0.XX% decimal points.Step 4: Other fixed income for your emergency and medical contingency fund on top of whatever medical insurance you deem to be sufficient and practical for your personal medial lifestyle. People can be very damn funny. They may swear to be frugal and live their daily life in Ward C and choose the cheapest option available to prove that they are frugal; but they fall sick and thinking that they are going to die soon; then they want to choose the best and willing to pay for the best at high costs at Ward A. Strange!Read? Medi Shield or Private Shield?

You hit it right on the nail!! I was thinking exactly the same thing when I read the 1st sentence of Uncle CW's blog post. Hahaha!!!

Anyway, this is not new. Backtest, monte carlo simulations, wooly calculations, black magic, hocus pocus, academic research etc has been done on this for at least 25 years in Ivy League ivory towers liao. Even got Nobel laureates economic professors also jump in & provide their Greek alphabet integration differentiation calculus formulas.

I first read about this in the mid-1990s. To make it simplistic, the basic conclusion for fixed drawdown is to start off with 4% of portfolio value (this is annual amount), and then increase the drawdown by inflation rate annually, say 3%.

To have good probability (e.g. >80% chance) of portfolio lasting till 95 yrs old, there should still be significant asset allocation to stocks e.g. 30%.

But all these based on black magic chanting, paper back-testing and probability analysis using monte carlo simulations, and some blood sacrifices.

In recent years, because of the "new normal" with 2 big market declines in early 2000s and 2008, people are saying that portfolio returns in future will not be so good as in the past, and so initial withdrawal of 3% will be safer.

The paper that Uncle CW linked is saying that after all their black magic mumbo jumbo, that initial 4% still OK lah. Although the experts cover their ass by saying DEPENDs on whether retirees are "flexible", can "downgrade" or "downsize", whether got guaranteed pension or annuity or not. Wah Lao!!!

PS: For those scared their descendants will squander their inheritance, just put into trust. Can specify monthly withdrawals on fixed or percentage amounts. Can also specify certain conditions when & how much large amounts of money released e.g. medical emergencies, when children reach 50 yrs old, etc etc.

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About Me

I am 60+ yrs old uncle living in HDB heartland who has retired @ 60 on 30 Sep 2016.
I have been doing long-term investing and short-term trading in Singapore stock market only since Jan 2000 and now becoming full-time retail investor. So I am that Panda or Koala in the investment world; but I am still surviving well in the wild.
I have two sons and one daughter; two working adult children and the youngest son is currently in his 1st year SUTD.
I am currently executing my Three Taps solution model to maintain sustainable retirement income for life till 2038
Cheers!
Last updated: 16 Oct 2016

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